Stein v. Stein Egg & Poultry Co., Inc.

• Decision Date: 12 November 1980
• Docket Number: No. 41576.,41576.
• Parties: Lewis STEIN, Plaintiff-Respondent, v. STEIN EGG AND POULTRY COMPANY, INC., a corporation, and Marshall Stein, Defendants-Appellants.
• Court: Missouri Court of Appeals

606 S.W.2d 203

Lewis STEIN, Plaintiff-Respondent, v. STEIN EGG AND POULTRY COMPANY, INC., a corporation, and Marshall Stein, Defendants-Appellants.

No. 41576.

Missouri Court of Appeals, Eastern District, Division One.

August 12, 1980.

Motion for Rehearing and/or Transfer Denied October 17, 1980.

Application to Transfer Denied November 12, 1980.

Lewis, Rice, Tucker, Allen & Chubb, J. L. Pierson, Kathleen Knaup, St. Louis, for defendants-appellants.

Padberg, McSweeney, Slater, Merz & Reid, Edward P. McSweeney, St. Louis, for plaintiff-respondent.

Motion for Rehearing and/or Transfer to Supreme Court Denied October 17, 1980.

WEIER, Judge.

When Lewis Stein, founder and president of Stein Egg and Poultry Company, Inc., retired from the company in March of 1975, he executed not only a stock sales agreement but also a consulting agreement which contained a covenant not to compete. Thereafter in December of 1976 he filed suit against the company to reform the consulting agreement by deleting the covenant not to compete. He also sought to permanently enjoin the company and Marshall Stein, a nephew and one of the owner-officers of the corporation, from enforcing the contract and for actual and punitive damages against the defendants. The case was tried before the court and the court determined the covenant not to compete contained in the consulting agreement was the result of a mutual mistake and it was never the intention of the parties that the plaintiff be bound thereby. The court thereupon struck the noncompetition covenant and the enforcement clause of the contract. Although plaintiff was denied his claim for damages, the defendants were permanently enjoined from enforcing the noncompetition clause. We have concluded that the court has erred as a matter of law and that the judgment must be reversed.

Plaintiff Lewis Stein, his two brothers Harry and Eddie Stein, and his nephew Marshall Stein, each owned twenty-five percent of the stock in the defendant Stein Egg and Poultry Company, Inc., now known as Crown Foods, Inc. In January of 1975 Lewis Stein told the others that he wished to sell his interest and retire from the company. Following discussions over a period of several months, an agreement was reached on the amount the plaintiff was to receive upon leaving the company. Two documents were prepared by the attorneys who had represented the company and were submitted to the parties. One was an agreement for the sale of stock and the other was a consulting agreement whereby plaintiff was to act as a consultant when requested and receive monthly compensation for seventy-two months. The covenant not to compete was contained in the consulting agreement. When plaintiff received a copy of the proposed consulting agreement, he told Harry and Eddie Stein and the corporate comptroller Ned Riggins that he wouldn't sign any contract which included such a covenant. Thereafter on March 17 a conference was held between Eddie, Harry and Marshall Stein, Ned Riggins the comptroller, and plaintiff Lewis Stein concerning the proposed agreements. Plaintiff had read both of these contracts prior to this meeting and knew the agreement contained the covenant which he objected to at that time. Lewis made known the fact that he did not want to sign the agreement with the noncompetition clause and turned to Harry Stein suggesting that they should get it over with. According to the version of the conversation which was accepted by the court in trying the facts, Marshall then said, "I don't give an F if you open up across the street." Lewis testified that he then stated: "Harry, you heard that, Eddie you heard that, Ned you heard that, Marshall you known what this means, I can do anything, anywhere, anytime at any place." According to Lewis, Marshall nodded his head and he said, "Yes." Lewis then said, "Okay. Then I'll sign." Although the version of the conversation given by defendant Marshall Stein places a different meaning on the conversation, we accept the plaintiff's version to be true as found by the trier of fact. Before we consider the contentions of the parties on appeal, we briefly review the law with respect to reformation of an instrument.

The power of a court to reform an instrument is an extraordinary one and must be guarded with zealous care and exercised with great caution. Reformation will be granted only in a clear case of fraud or mistake. Thornburgh v. Warson Village Corporation, 331 S.W.2d 144, 147-1481, 2 (Mo.App.1960). If an instrument is sought to be reformed on the grounds of mutual mistake or cancelled on the grounds of mistake or fraud, the evidence to justify either must go beyond a mere preponderance of the testimony and remove all reasonable doubt. In other words, the proof to justify such action on the part of the court must be so clear, convincing and complete as to exclude all reasonable doubt in the mind of the chancellor. Allan v. Allan, 364 S.W.2d 578 (Mo.1963); Stubblefield v. Husband, 341 Mo. 38, 106 S.W.2d 419, 4233 (1937); Thornburgh, supra at 1483.

Further, false representations as to the legal effect of an instrument are no bar to an action thereon because a party signing such an instrument is presumed to know its contents and has no right to rely on the representations of the other party as to its legal effect. Motor Transportation Springfield v. Orval Davis Tire Co., Inc., 585 S.W.2d 195, 2001 (Mo.App.1979). This general rule is subject to "two well-recognized exceptions: (1) where there is a relation of trust and confidence between the parties ...; and (2) where one party is possessed, or professes to be possessed, of a superior knowledge of the law and takes advantage of the other party's ignorance of the law to mislead him.... (Emphasis added)." Emily v. Bayne, 371 S.W.2d 663, 6688 (Mo.App.1963); Motor...